Trump paid $38 million in income taxes in 2005, the White House says

WASHINGTON – President Donald Trump paid $38 million in federal income taxes in 2005 on an income of $150 million, according to a partial tax return released Tuesday by MSNBC host Rachel Maddow and confirmed by the White House.

The release of the two-page 1040 return came after Trump refused for months to release his returns despite decades of precedent by candidates and presidents of both parties, sparking speculation that he had avoided federal taxes for years.

But the release of the 2005 tax return shows that speculation was incorrect, a finding that could end up being good news for the president.

Critics had long accused him of hiding his tax returns because he wasn’t worth what he said or because he didn’t pay much in taxes, speculating he had used a nearly $1 billion business loss from the 1990s to shield himself from federal tax obligations for years.

“He doesn’t want the American people, all of you watching tonight, to know that he’s paid nothing in federal taxes,” his Democratic rival Hillary Clinton said at a debate last fall.

Trump didn’t deny the accusation. “That makes me smart,” he responded.

But with the release of the returns both of those accusations were proven false.

It also made clear that Trump’s income is in a different league from previous presidents. By comparison, President George W. Bush and wife Laura reported adjusted gross income of $735,180 and paid $187,768 in taxes, according to their 2005 return.

The year 2005 was a banner year for Trump. He and partners from Hong Kong sold New York property on the Upper West Side for $1.8 billion, at the time considered the largest residential real estate deal in New York City history.

The White House released the details after Maddow announced via Twitter that she would release the return during her show Tuesday night.

Trump paid roughly 24 percent in 2005 federal taxes. By comparison, Clinton paid an effective federal tax rate of 30.8 percent in 2005, according to her campaign.

“The White House has confirmed the top line. It’s what’s behind that that really matters,” said Roberton Williams, a senior tax expert at the Tax Policy Center, a think tank jointly run by the centrist Urban Institute and the center-left Brookings Institution.

Trump’s tax returns are unique because he is a commercial real estate developer, and he runs his business empire as a private concern with his income flowing to his personal income that he claims on a 1040 form like ordinary Americans.

In 2005, the top tax rate for the richest Americans like Trump was 35 percent. Today it is 39.6 percent. But because Trump’s business was buildings, he was able to write off loans and the depreciation of his assets. These deductions are why he in 2005 paid the alternative minimum tax.

This tax took effect in 1970 amid outrage that a number of very rich Americans used loopholes to pay no federal income tax.

David Cay Johnston, the Pulitzer Prize winning journalist who the tax information was passed to, said Tuesday night that if not for the alternate tax, called the AMT, Trump would have paid less, just $5.3 million in tax; the alternative minimum tax added $31.3 million to the bill.

“This means there is a lot of stuff considered preferential income from an AMT perspective,” said Williams, pointing to interest on loans and a host of other write-offs.

The 2005 returns also reflect tax cuts put in place in 2001 and 2003 under President George W. Bush, which allowed capital gains on investment income and dividends issued by corporations to be taxed at a rate of 15 percent instead of the rate of ordinary income.

The 2005 returns released Tuesday night did not include Trump’s Schedule A for that year, which would have detailed information on itemized deductions such as state and local taxes and charitable contributions.

“It would be interesting to know how much he gives,” said Williams. “The detail is often where the interesting things are found.”

Maddow said the document was sent to Johnston, who wrote a book on Trump and appeared on her show.

Trump ignored years of tradition and never released his tax returns during his campaign. This led to many questions about what may be in them. The returns have since become a mystery that has dogged the Trump administration since he declined to release them – the first presidential candidate to refuse to make his returns public in decades.

“My understanding is he’s still under audit and I’ll follow up on the question,” White House press secretary Sean Spicer replied to a question last week about whether Trump would release his returns.

Despite the release, Americans still do not know where his money came from – a question that has been asked for months.

Johnston told Maddow he was unable to determine Trump’s sources of income, partners or interest payments from the document.

Nonetheless, Democrats slammed Trump for withholding the returns from the public.

“The White House’s willingness to release some tax information when it suits them proves Donald Trump’s audit excuse is a sham,” said Zac Petkanas, an adviser to the Democratic National Committee. “If they can release some of the information, they can release all of the information.”